Short-Treasury ETFs and Bill Gross

By John Spence

Everyone is talking about how investors pouring money into bond funds could get burned when interest rates rise.

Couple things caught my eye this week on this story.

Big swings in leveraged ETFs designed to short Treasury bonds are not uncommon. But the recent rally in ProShares UltraShort Treasury 20+ Year Treasury (TBT) and Direxion Daily 30-Year Treasury Bear 3x Shares (TMV) has unfolded during some lackluster Treasury auctions this week. TMV has jumped about 10% over the past three days.

Separately, whenever Pimco’s Bill Gross is out with bearish comments on bonds, investors want to listen up. Gross told Bloomberg that bonds have seen their best days, and that investors may want to cut back with the prospect of a strengthening U.S. economy and higher interest rates.